Unit 6 - D251 Advanced Auditing questions with verified
answers
A substantive audit procedure that would reveal ownership and related disclosure
issues includes scanning the cash receipts journal for relatively large inflows of
cash that from unusual sources. Ans✓✓✓ True
After identifying the risks of material misstatement, an auditor develops an audit
plan in response to those risks.
Which plan for testing revenue should the auditor implement if the auditor
believes that the control risk is high?
a. Obtain necessary audit evidence only from tests of details
b. Obtain 60% of the necessary audit evidence from tests of controls and the
remaining 40% from substantive analytical procedures
c. Obtain 40% of the necessary audit evidence from tests of controls and the
remaining 60% from substantive analytical procedures
d. Obtain necessary audit evidence only from tests of controls Ans✓✓✓ a. Obtain
necessary audit evidence only from tests of details
After identifying the risks of material misstatement, the auditor develops an audit
plan in response to those risks. Which of the following plans for testing revenue
would be most likely when the auditor believes that control risk is high?
a. The only evidence the auditor plans to obtain is from tests of details.
,b. The auditor plans to obtain 40% of the necessary audit evidence from tests of
controls, and the remaining 60% from substantive analytical procedures.
c. The auditor plans to obtain the majority of the necessary audit evidence from
tests of controls.
d. Any of the above would be an appropriate audit plan if the auditor believes
that control risk is high. Ans✓✓✓ a. The only evidence the auditor plans to
obtain is from tests of details.
An auditor performs tests of controls in the revenue cycle. First, the auditor
makes inquiries of company personnel about credit-granting policies. The auditor
then selects a sample of sales transactions recorded in the general ledger and
examines documentary evidence of credit approval.
Which financial statement assertion(s) does this test of controls most likely
support?
a. Presentation and disclosure
b. Valuation
c. Completeness
d. Rights and obligations Ans✓✓✓ b. Valuation
, An auditor selects a sample of prenumbered shipping documents and verifies that
each transaction exists in the sales journal.
Which management assertion is addressed by this scenario?
a. Completeness
b. Presentation
c. Timing
d. Rights Ans✓✓✓ a. Completeness
Auditors in practice commonly use negative confirmations. Ans✓✓✓ False
Channel stuffing is a fraud in the revenue cycle that involves recording revenue
after a customer has requested to purchase the inventory. Ans✓✓✓ False
Diageo made improper cash payments to government officials in Mexico, Brazil,
and Argentina during the period 2003-2009, which violated provisions of the
Foreign Corrupt Practices Act. Ans✓✓✓ False
How should an auditor proceed after assessing a client's risk of material
misstatement?
a. Assess control risk
answers
A substantive audit procedure that would reveal ownership and related disclosure
issues includes scanning the cash receipts journal for relatively large inflows of
cash that from unusual sources. Ans✓✓✓ True
After identifying the risks of material misstatement, an auditor develops an audit
plan in response to those risks.
Which plan for testing revenue should the auditor implement if the auditor
believes that the control risk is high?
a. Obtain necessary audit evidence only from tests of details
b. Obtain 60% of the necessary audit evidence from tests of controls and the
remaining 40% from substantive analytical procedures
c. Obtain 40% of the necessary audit evidence from tests of controls and the
remaining 60% from substantive analytical procedures
d. Obtain necessary audit evidence only from tests of controls Ans✓✓✓ a. Obtain
necessary audit evidence only from tests of details
After identifying the risks of material misstatement, the auditor develops an audit
plan in response to those risks. Which of the following plans for testing revenue
would be most likely when the auditor believes that control risk is high?
a. The only evidence the auditor plans to obtain is from tests of details.
,b. The auditor plans to obtain 40% of the necessary audit evidence from tests of
controls, and the remaining 60% from substantive analytical procedures.
c. The auditor plans to obtain the majority of the necessary audit evidence from
tests of controls.
d. Any of the above would be an appropriate audit plan if the auditor believes
that control risk is high. Ans✓✓✓ a. The only evidence the auditor plans to
obtain is from tests of details.
An auditor performs tests of controls in the revenue cycle. First, the auditor
makes inquiries of company personnel about credit-granting policies. The auditor
then selects a sample of sales transactions recorded in the general ledger and
examines documentary evidence of credit approval.
Which financial statement assertion(s) does this test of controls most likely
support?
a. Presentation and disclosure
b. Valuation
c. Completeness
d. Rights and obligations Ans✓✓✓ b. Valuation
, An auditor selects a sample of prenumbered shipping documents and verifies that
each transaction exists in the sales journal.
Which management assertion is addressed by this scenario?
a. Completeness
b. Presentation
c. Timing
d. Rights Ans✓✓✓ a. Completeness
Auditors in practice commonly use negative confirmations. Ans✓✓✓ False
Channel stuffing is a fraud in the revenue cycle that involves recording revenue
after a customer has requested to purchase the inventory. Ans✓✓✓ False
Diageo made improper cash payments to government officials in Mexico, Brazil,
and Argentina during the period 2003-2009, which violated provisions of the
Foreign Corrupt Practices Act. Ans✓✓✓ False
How should an auditor proceed after assessing a client's risk of material
misstatement?
a. Assess control risk
